Real Estate Investor Magazine South Africa May-June 2015

SOUTH www.reimag.co.zaAFRICAN ©Learn Proven ALERT:Strategies To New RentalMake Money Scam To Avoid!Passively DONALDHow To Invest likeHow To Make Your RetirementSafe From Rising Inflation TRUMP MAY 2015 SA Real Estate Investor A10 WaysToBecome A Property Multi-Millionaire!MAY/JUNE 2015 R60.00 (Incl. VAT) WINNER 05068 SAPOA AWARDS 9 771995 655001www.reimag.co.za Best Feature Publication 2012 Best Printed Property Publication 2013

“Is this the property investment for us?” “It will be.”In the world of property, patience is a virtue. We’re Moving ForwardTMhere to ensure that your rewards will be worthwhile,in the end. We offer long-term financial property www.reimag.co.zasolutions that prepare you for any eventuality.www.standardbank.co.zaAuthorised financial services and registered credit provider (NCRCP15).The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06).Moving Forward is a trademark of The Standard Bank of South Africa Limited.SBSA 201805 – 3/15B MAY 2015 SA Real Estate Investor

CONTENTS COVER STORY›› ››MAY201510 Master Investor 14 Trump’s Secrets To Success 32 Property Millionaire46 Energy Efficiency Incentives 56 Foreign Currency Trends UPFRONT COMMERCIAL RESIDENTIAL 9 Investor Talk From the Copy Editor and Editor-In-Chief 42 Avoid Costly Mistakes 22 Getting Credit Checked 6 Ask an expert 43 New Property Funds 23 VAT Vendor Conundrum Your property questions answered 44 Trendsetter And Innovator 26 Buy-To-Let Business System 10 Master Investor 46 Energy Efficiency Incentives 28 Inflation Risk Dolf De Roos 48 Transport Trends 30 Can Trustees Cut Power? 14 Cover Story 49 Statistics 31 Rental Scams The Trump Factor 50 eThekwini UDZ 32 Property Millionaire 34 Auditing Season OFFSHORE 35 Statistics 36 Think Like An Evaluator 54 Zambia 55 Botswana 56 Foreign Currency Trends 58 Statistics 60 Crossrail Transport 61 Celtic Tiger Returns 62 Invest Brick Buy Brick 63 Investor resources 64 Credit Karma INTERACT REIMAG Video Content Available In Our Digital Edition .co.za WITH US find us on twitter find us on youtubefind us on facebook www.twitter.com/Sa_Reimag www.youtube.com/reimagwww.facebook.com/Real Estate Investor Magazine

›› ››PUBLISHING CREDITS EXPERT CONTRIBUTORSEDITORIAL KOOS DU TOITPublisher Neale Petersen Koos is the CEO of P3 Investment Group and an invaluable sourceCopy Editor Megan Diener of education and information on investing in property. P3 offersDesigner Kurt Daniels hope and guidance to anyone looking to build a successfulFinancial Manager Marisa George investment portfolio.Digital Strategist Nadine Harrison ANDREW RISSIK Andrew is Managing Director of Sable Group’s Forex business, which facilitates investment of international client money in the emerging SA property market. He established The Sable Group after a decade in the UK doing private equity deals.CONTRIBUTORS MICHAEL BAUERNeale Petersen, Koos Du Toit, Michael Bauer, Gaye De Michael Bauer is a regular contributor to www.sectionaltitlesa.Villiers, Jason Vorster, Louw Liebenberg, Richard Wade, co.za and general manager of IHFM, which has offices in Gauteng,Marlon Shevelew, Attie Anderson, Monique Terrazas, Durban and Cape Town.Matepa Kamoto, Killion Mokwete, Andrew Rissik, Wim MARLON SHEVELEWPrinsloo, Mike Smuts and Vangile Makwakwa. Marlon is the Director at Marlon Shevelew and Associates, aADVERTISING 15 time international award winning law firm. The firm specialisesDylan Koning in Rental Property, Contractual, Consumer and Company law.Email [email protected] KILLION MOKWETETel 021 761 3848 Cell 082 759 3637 Killion is an Editor and Managing Director of Boidus Media. HeFax 086 627 2400 publishes Boidus Focus, a newspaper for the construction indus-SUBSCRIPTIONS try in Botswana, and www.boidus.co.bw.Marisa GeorgeTel 021 761 [email protected] WIM PRINSLOOOn The Dot Distribution Wim is a Portfolio Manager at Reitway Global. He has worked atJayfred Moses Liberty Group and then at Quantum Asset Management as anTel 021 944 5524 or 081 726 2677 Analyst and Assistant Portfolio ManagerPRINTING RICHARD WADETandym Print Richard is the CEO of Horizon Valuation. He specializes in invest-PUBLISHERS ment appraisals for multi-tenanted, mixed-use properties. TheyREALE MEDIA offer valuations of commercial, residential and developmentTel 021 761 3848 properties for legal, investment, accounting and lending forFax 086 627 2400 strategic purposes.Email [email protected] VANGILE MAKWAKWAPhysical 41 Constantia Road Wynberg, Vangile is a Financial Literacy Speaker for the youth segment and7800, Cape Town author of ‘Heart, Mind & Money: Using Emotional IntelligencePostal PO Box 858, Howard Place, 7405 with Money.’Website www.reimag.co.za DIGITAL EDITION THE ULTIMATE PROPERTY INVESTMENT RESIDENTIAL GUIDEBOOK Residential Group First Global Limited Property Investments GUIDEBOOK 2014 Your A-Z Guide On Property EDITION 6 The Roommate Debate Share with the right person Business Don’t Panic It’s rent increase time... www.reimag.co.za Store SOUTH SA’s #1 REAL ESTATE INVESTMENT GUIDE Park AFRICAN 2014 All rights reserved. No portion of this publication may be reproduced or used in any form without prior written consent and permission from Reale Media. IS BROUGHT TO YOU BY REALE MEDIA ISSUE 5 The publisher gives no written guarantees or assurances and makes no representation regarding any goods or services written or advertised within this R100 (Incl VAT) edition. Prospective investors should always consult their attorneys, advisors or accountants. On your iPad, Mac, PC or Laptop now! Copyright © Reale Media. WWW.REIMAG.CO.ZA2 MAY 2015 SA Real Estate Investor www.reimag.co.za

Hosted by CONFERENCE 2015RODE-REIM REAL ESTATE Sponsored byOPPORTUNITYNapoleon Hill By attending REIM-Rode Real Estate Author of ‘Think and Grow Rich’ and philanthropist Conference you will learn: “Your big opportunity may • How the SA and world economies are performing be right where you are now” • Prospects for property in uncertain times • Which are the best performing markets • New emerging world trends in the market • How to invest in these new markets • A new form of financing real estate • What the global approach is to real estate investing • New lessons & resources for investors • How to master new skill sets to differentiate yourself Rode-REIM Real Estate Conference Dates 2015 • DURBAN – Half-day Conference – Gateway Hotel – Tuesday, 18 August • JOHANNESBURG – Full-day Conference – Emperors Palace – Wednesday, 19 August • BLOEMFONTEIN – Half-day Conference – Ilanga Estate – Friday, 21 August • PORT ELIZABETH – Half-day Conference – Radisson Blu Hotel – Tuesday, 25 August • CAPE TOWN – Full-day Conference – Spier Wine Estate – Wednesday, 26 August • WINDHOEK, NAMIBIA – Half-day Conference – Hilton Hotel – Friday, 28 AugustBOOK NOW ! Contact Lynette for enquiries: 012 664 4159 • [email protected] • www.rode.co.za • www.reimag.co.za

NEVER MISS AN ISSUESubscribe now to our award-winning magazineHave the Real Estate Investor Magazine delivered directly to your door for only R600 for a one year subscription(11 editions) which includes FREE annual property handbooks to the value of R300.3 Ways to ONLINEsubscribe Go to www.reimag.co.za, click subscribe EMAIL [email protected] CALL +27 21 761 3848 *Applicable in RSA

INVESTOR TALK‘South Africans Clean up your Mess!’FROM THE PUBLISHER The news of attacks on recently returned from a trip to the United States, where foreign nationals by a it is becoming more difficult to defend those statements few disgruntled locals to investors and businessman who are willing to invest. If protesting against the lack of we want South Africa Ltd to become a winning nation, service delivery, as well as the then we have to follow the example of other countries unavoidable rolling blackouts like the United States, Germany and Switzerland. These due to lack of skills and countries all have liberalized economies that welcome management incompetence, foreigners and understand their immense contribution is impacting businesses to the local economy. Our government does not realize negatively. This follows the the implications of their decisions, which is putting our defacing of statues and the economy in an extremely vulnerable position and verging general mayhem by the poor on a collapse. True leaders please step up! It is your time! who are demanding action by government. The current At REIM, we support the notion of transformation situation is now starting to through ownership of property. We know that as a result have a negative impact on our of the Land Act of 1913 and the Group Areas Act of 1957 economy and our future as a many black South Africans have had occupation rights sustainable country. but no property rights. Wealth is built on property rights. REIM, as always, is the prime educator for those who are Celebrity property billionaire and businessman, Donald both first time homebuyers and seasoned investors.Trump, who features in our cover story this month, haslong voiced his opinions on the state of South Africa. He We hope you enjoy this issue with more new ideas,recently tweeted that, ‘South Africa is a total and very tips, tools and resources to help any start-up or seasoneddangerous - mess. Just watch the evening news.’ When I investor grow their wealth through property.met Trump in Sydney, Australia in September 2011, hetold me that South Africa was a challenging place to do Enjoy the read!business. His detractors have challenged Trump regularlybut this time around it is starting to get out of control. We need new leaders to start initiating some positive NEALE PETERSENaction instead of government being in constant denial. I FOUNDER AND EDITOR-IN-CHIEFTime to Lead by Example.FROM THE EDITOR Businesses and are being building our country by firstly, improving upon service negatively affected by delivery and constructing infrastructure. Eskom’s power crisis causing rolling blackouts. Despite changes and shifting trends in the market the Economic growth is steadily right mindset and attitude goes a long way in helping you decreasing. to benefit from your real estate investment journey and reap the rewards. South Africa’s economic outlook has dropped by 2 In this edition, learn how to invest like Donald Trump percentage points, from with his’ 10 secrets to property success. 2.7% last year to 2.5% this year. This is according to the See how you can become a multi-millionaire through World Bank. property. We need new leaders who Discover how safe your retirement home is from the are willing to fix the myriad rising cost of inflation. of problems we are faced with daily. It is time for Then, read Tebogo Mogashoa’s inspiring story about these leaders to focus on re- being an innovative property trendsetter. Prosperous investing! MEGAN DIENER COPY EDITOR “We can change the world and make it a better place. It is in your hands to make a difference.” NELSON MANDELAwww.reimag.co.za MAY 2015 SA Real Estate Investor 5

ASK THE EXPERTS Q&AQ QQ Matie Jacobs asks: QQ Kayla Lewis asks: Do you know of a South African Q Hellip asks: I am an Investment buyer, Can you please help me buyproperty inspection App that I a house? I don’t have enough looking for a high rentalcan use on my Ipad to inspect money. My wife and I both earn income. Is it better to invest ineach room, make comments, take R3 500 each. Can you please help commercial or residential propertyphotographs and download a full us buy a house? in South Africa or abroad? I havereport when I am back at the liquid cash, ready to invest.office?AA Neale Petersen AA Meyer De Waal AA Koos Du Toit of Real Estate Investor Magazine of Rent2Buy answers: of P3 Investment Group answers: answers:The best inspection applications You may be able to qualify for Property investment carries available in South Africa a Finance Linked Individual varyious risks depending on include Inspection Manager, Subsidy Plan (FLISP). Your different variables. CarefulHappy Inspector and eInspect by subsidy can be +/- R63 000 based research into the pros and cons ofHarcourts. These applications are made on your joint income as a deposit. each alternative is vital before youfor property managers or residential Consider your debt exposure and spend your money.letting agents but anyone can use them. credit profile. If this is acceptable (based on an income of R7 000), Investing abroad means you Compile a comprehensive property you can qualify for 30% of that for will have to trust others entirelycondition report with Inspection a monthly home loan repayment of for the transaction and continuedManager. Then, securely send or sync R2 100. management of the property. Youreports directly to your office computer. require large amounts of money That can give you a bond of +/- upfront, have little control and the This application conveniently lets R220 000 (depending on the interest risks are high. However, the rewardsyou rate the condition of the property, rate from your bank). Now you can can be very high because you earntake photographs and add personal add your FLISP subsidy of +/- R63 foreign currency.comments about the inspection. 000. Your purchase power will be +/- R 280 000. Investing in commercial property Happy Inspector, meanwhile, can earn high rental income, butassists you in doing comprehensive You can only apply for a FLISP factories and offices are first todue diligence reports for your property. subsidy once your bond is approved. stand empty during an economicThen, safely store or send them via downturn. Returns are linked toDropbox. Customise Happy Inspector Budget for transfer and bond economic cycles.to produce inventory, midterm, routine registration costs. Buy a propertyor periodic, move in or move out and from a developer who includes costs Carefully selected local residentialletting criteria. Take many photographs, in the purchase price, or reduce properties will give good returns andcaption them and then embed them this price to cover these costs. An there will always be high demand forin the report, either directly next to estimate of these costs is +/- R9 300 these properties. Selecting a goodthe damaged item, or added as an for a transfer of R280 000. Factor in rental agent is vital.addendum at the end of the document. the bank bond raising fee at +/- R5 000. Go to www.avidf irefly.co.za Ask The Do you have a property question you would like answered by our experts?Property Experts click here If so, post it on ASK THE EXPERTS on www.reimag.co.za or email [email protected] MAY 2015 SA Real Estate Investor www.reimag.co.za

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PROPERTY ALERTSGTohoed BTahde TUhgelyReal Land Reform Paying Ever More For Securitaisation Even Less Power Scrutinised AgainAtitle deed is a powerful tool, As consumers and business reel Publication of research coor- a game changer for millions from almost daily load-shed- dinated by Advocate Douglas of this country’s poorest ding and experience the Shaw have again brought secu-citizens, as it unlocks dead capital darkness of Stage three load-shed- ritsation under scrutiny, as the find-into the hands of those who need ding, Stage four load-shedding is in- ings suggest that banks are hidingit most and through them, into the troduced in April. The possibility of the securitisation of home loans fromeconomy. a total grid collapse becomes a topic the courts, pretending they are still of conversation as the power grid lost the registered owners of the mort- In April, the Khaya Lam Land 45% of its available capacity in April gage bonds when they are not.Reform project delivered property and South Africans shudder to learnownership and prosperity to 159 it will take an estimated two weeks to Securitisation is the banks’more Ngwathe Free State families, power up the grid again should this practice of bundling loans togetherand announced pledges of freehold happen. Public Enterprises Minister and on-selling these to investors whotitles for more than 200 other tenants. Lynne Brown warns that load-shed- buy and sell these assets on the JSEThe Khaya Lam Land Reform ding is likely to remain an ever-pres- and other stock markets. Once a loaninitiative is a partnership between ent threat over the coming two years. is securitised, the bank loses legalthe Ngwathe Municipal Council and Nevertheless, electricity tariffs will title to the loan, as the law requiresthe Free Market Foundation (FMF). increase by an average 13% on 1 July, a securitised mortgage bond to beThis latest hand out of title deeds double the rate of inflation and more ceded to the new owner at the Deedswas sponsored by Dr Christo Wiese, than the 8% initially approved for the registry office.who personally handed over 100 title year through 31 March 2016.deeds to Ngwathe beneficiaries and Adv Shaw’s team of researchershas sponsored 100 more designated Yet, in addition, Eskom will ask randomly sampled several hundred-for Cape Town. the National Energy Regulator of mortgage bonds. Based on the SA to increase tariffs by 25.3% from banks’ own figures on securitisation, Founding sponsor FNB announced 1 July - double the expected hike - at least 20% of these shall havethat, in addition to their initial 100 to help pay for the cost of diesel to new owners reflected on the Deedshanded out in 2014, there are 200 run its open-cycle gas turbines and to registry, but not a single one of themore conversions in the pipeline. continue to pay independent power bonds was reflected as having a newOther announcements made were producers. owner. An expert statistician says theby two local farmers who were possibilities of this occurring are ‘asponsoring seven titles each for their Experts have warned South million to one.’ The researchers sayworkers and by the Weiveld farmers Africans that years of double-digit this points to massive and systematicwho will be sponsoring title deeds electricity price rises were likely, fraud by the banks. Not only arefor 27 non-farmworker community but that there was no guarantee home owners being stripped ofmembers. Within the next few this would solve Eskom’s problems. their houses through legal fraud,months, the Khaya Lam project will Property owners are well-advised to the securitisation vehicles traded onhave completed about 700 property investigate alternative power options. the JSE may be ‘empty shells’ withtitle conversions. under-reported or no underlying assets shown.8 March 2015 SA Real Estate Investor www.reimag.co.za

Investor Talk with TebogoMogashoa, Chairman of Talis Group Holdings Gain significant insights from an African property entrepreneur. Visit REIM TV to see Tobogo’s path to growth. www.reimag.co.za

MASTER INVESTORReal EstateHowYouTooCanMakeYourFortuneIn Dolf De Roos Tells You How10 MAY 2015 SA Real Estate Investor www.reimag.co.za

D olf de Roos is synonymous with the real estate PERSONAL investment industry. He is well known in South STATISTICS Africa for the property seminars he has conducted there and for his investment tours. He is well known Age: 54 too for his eight-bestselling books, his property Married: Single education programmes and property management Children: One daughter, Bellasoftware and his mentoring programmes, which have had a majorimpact on the lives of thousands of people around the world, including CLOSE-UPmany South Africans. Mentors: One of Dolf’s great Worldwide and in South Africa many so-called property gurus have mentors is Buckminster Fuller, whotried to replicate his model, many of them not even investors themselves was an extremely creative person andbut salesmen making money off property sales and related services. a serial overachiever. As an American philosopher, systems theorist, architect, Dolf has presented his model in more than 26 countries. He has engineer, author, designer, inventor andshared the stage with Jim Rohn and Mark Victor Hansen and has futurist, he had a pervasive influence onworked with Tony Robbins on Wealth Mastery. He presents an the world, creating a host of inventions,interfaculty of Trump University, where many of its programmes are patents, books, critical paths andbacked by Dolf ’s strategies. He is Professor of U & T at the University inspired initiatives to change the worldof North Dakota and a faculty of the Texas University. Dolf began into a better place. Dolf’s other mentorsinvesting as an undergraduate student while studying for a Ph.D in include legendary personal developmentelectrical and electronic engineering at the University of Canterbury specialists Dennis Waitley, Jim Rohn andin New Zealand. Zig Ziglar. What is he reading? What separates him from the other international so-called gurus is “Sovereign Individual” by Lord Reesthat he walks the talk. He has always been an active investor, building Moggs and James Davidson is an examplehis portfolio. Born in New Zealand and raised in Australia and Europe, of a book that made a massive impactDolf is now based in Phoenix, Arizona, in the United States, which he on him.believes is the best area in the world to invest in real estate. Life motto: Dolf lives by his motto: “It is not who is right, but what is right” and However, he does not only invest in his country of residence but also he believes that you do right through yourinternationally. He owns multiple types of real estate in commercial actions. Charm might strike the sight butand residential property. merit wins the soul. His book Real Estate Riches was a New York Times and Wall Street MAY 2015 SA Real Estate Investor 11Journal bestseller and formed part of the successful Rich Dad Poor Dadseries. He regularly conducts seminars, investment tours and educationevents throughout the world, including in the United States, Australia,New Zealand, Europe, Middle East, Asia and South Africa. REIM caught up with Dolf to get an update on where real estate istoday and whether it is still a good investment. Dolf has been investingin real estate for decades. He shows people from all walks of life how tofind great deals and make great profits in real estate. His proven tactics,quick and easy tips and investment prowess can turn even the noviceinvestor into a pro. Dolf ’s claim to fame is that he has never had a ‘real’ job in his life,because the real estate he invested in pays him far better. Few peoplecan truly affirm that their wealth is built on real estate. As such, Dolfinspires entrepreneurs with his psychology of wealth. Dolf is mainlyassociated with investing in residential property, because this is the fieldmost people are interested in and want to learn about. However, hispersonal interest and the majority of his own real estate investments arein commercial property. He believes that his book about investing incommercial property is the best book that he has written. The secret of commercial property investment, he says, is to knowhow to convert an ordinary building into an extraordinary income www.reimag.co.za

generator by increasing its value Property prices plummeted a big difference, so Dolf suggestsmultiple times and by increasingthe value of the rental income. in both Las Vegas and Phoenix, investing a little in the less costly Dolf says you can’t do that as a result of the global financial improvements that make a betterwith residential property or withstandard commercial property. crisis. Little new housing stock first impression, such as a fresh coatHe therefore buys property witha twist, including fish and chip has come onto the market because of paint or a new front door.shops, dairies, vineyards, veterinarysurgeries,convenience stores,barber replacement costs are high. With ashops, strip malls, light industrialfacilities, car paint facilities, funeral growing population, more people The opportunities parlours and selective office andstorage facilities. are living together including newly Dolf always invests where there is One must know how, he says, to married couples that continue to good population growth. He alsoacquire an empty building and fill itwith tenants. live with their parents. saves by going green. For example, He believes that doing This is in part due to foreclosures he has just converted the lighting innothing is more risky than doingsomething. The global financial and poor credit records but when a commercial building from generalcrisis has brought about massiveopportunities in the US,particularly the economy turns many of these incandescent and fluorescent to lowin Phoenix, Arizona, and in LasVegas, Nevada, which boast higher people will want their own homes cost solar technology low energypopulation growth and capitalgrowth than the national average and demand will soar. lighting. The conversion costand are the best performingproperty markets in the US. $7 000, but thanks to a $6 200 These markets have attracted “Know how subsidy the net cost amounted tomassive interest and investment to convert only $800, with an annual saving offrom Brazil, China, Canada, $1 000 a year.Australia and New Zealand,because the properties have low In addition, the excess powerprice points. can be sold back to an electrical Many Australians have come to an ordinary companythe US to implement fix-and-flip By using paint that reflectsstrategies, buying low and selling inabout four or five months to spin building into an 98% of heat radiation, energyquick cash. Some investors made consumption can be furtherinstant profits of $20 000 to $40 reduced by 30%. There are many000, using the strategy to build extraordinary other energy efficiency methodscash flow, as they have no capitalreserves. income investors can offer tenants that give massive value over the long term. Of course, they faced a differentproblem when they had to fork out Dolf advises it is wise to buy attax on the capital gain. generator.” least one offshore property in the Dolf still swears by the buy-and- US now, saying that the low pricehold strategy, noting that it is washarder to flip properties in 2013 as points that currently exist willprices were rising by, for example,10% per month in Phoenix. never be repeated in this lifetime. Dolf names Phoenix and Las Single-family homes are available Vegas as the top two performing at the lowest prices ever seen. cities over the last 45 years. He says Dolf says the Las Vegas jackpots that single-family homes are the are not in the casinos but in the best bet over the long term because suburbs! Vegas offer a low cost of they hold value and are easier to living, low taxes, a warm climate, manage, compared to communal great food and entertainment. As a living properties where multiple result, new residents are pouring in tenants can create disharmony. from around the country. However, Dolf advises investors Dolf ’s life philosophy is simple, to look for properties with a twist but powerful: “Life is what you or that offer the potential to add make it. The only meaning in life is value, such as properties with big the meaning we give things.” bathrooms or RESOURCES space to build a garage. Small De Roos, D and Sutton, G. ‘Real Estate Investment details make and Management’ (2003), Success DNA Inc.12 MAY 2015 SA Real Estate Investor www.reimag.co.za

Psychology of creating wealthLearn how to grow your wealth from OFFERPROMOTIONALthe mastermind of real estate investing,Dolf De Roos, and get your copy of hisacclaimed books and CD’s today. Real Estate Investment Management Real Estate Riches 101 Ways to massively increase the value of your real estate without spending much money 17 CD Wealth Maker System course Was R2 350. Now only R2 000!To place your order or find out more about mentorship programmes with Dolf go to reimag.co.za

COVER STORY14 MAY 2015 SA Real Estate Investor www.reimag.co.za

TFhaecTrtuomrpDonald Trump’s Secrets To SuccessBY MONIQUE TERRAZAS“If you are going to be thinking anything,you might as well think big.”www.reimag.co.za MAY 2015 SA Real Estate Investor 15

WEALTH BUILDNG Donald Trump is D onald John Trump is the the world’s most famous Chairman and CEO of the Trump property billionaire. Trump Organization which develops iconic shares with us strategies, buildings. He is also the founder of Trump Entertainment Resorts. principles and secrets Trump’s plush property portfolio for property success from includes numerous luxury apartments, condominiums, hotels, golf courses and casino’s, located both in the the small investor to United States and internationally. the big investor. ‘The Donald’ has gained celebrity status as the16 MAY 2015 SA Real Estate Investor Executive Producer of the reality television series, ‘The Apprentice’ and ‘The Celebrity Apprentice’, and has even received a star on the Hollywood Walk of Fame in 2007. His’ diversified offshore portfolio includes developments in Puerto Rico, Panama, Canada,Turkey, the Philippines, India, Uruguay and Brazil, as well as prestigious golf courses in the United Arab Emirates, Ireland and Scotland. Earlier this year Trump submitted new plans to develop about 3, 000 properties (850 homes and 1, 900 holiday units) near the Alisa golf course in Turnberry, Scotland. The hotel has re-opened and the renovation of the clubhouse is set to be completed next month. Trump also plans to acquire the historic lighthouse. Meanwhile, Trump’s other projects include the golf course at Ferry Point in New York which has recently been opened. He is also currently re-developing the Doral Hotel and Country Club in Miami, and the historic Old Post Office building in Washington D.C. into a luxury hotel. “To create more rental income, create an inviting exterior.” Trump has come a long way since he first opened the Grand Hyatt Hotel in Manhattan in 1980. “People often ask me the secret to my success,” Trump muses, “The answer is simple: fous, hard work and tenacity, as well as being business savvy.” George Ross, his trusted legal advisor, shares Trump’s secrets to success in his book, ‘Trump Strategies for Real Estate’. Gary Eldred, a Professor at Trump University, shows us how to build wealth with property investments in his book, ‘Real Estate 101’. In this article we have to opportunity to learn from Donald Trump, George Ross and Gary Eldred about how you too can become wealthy by successfully investing in property. www.reimag.co.za

CASE “How to Get Rich Trump Style” STUDY other words, the so-called ‘average BEST ADVICE TRUMP’S COMMODORE-HYATT market price’ of property is PROJECT computed based on limited general from Donald Trump information relating to an entire Trump’s first big real estate deal in 1974 neighbourhood, not the value of a was the transformation of the vacant, specific property which may have dilapidated Commodore Hotel on 42nd a desirable size and be in a better Street, near Grand Central Station, into location. the Grand Hyatt hotel. Trump, then only 27 years old, plan was to convert the old You may have to pay 50% - 100% building into a 1, 400-room convention more to get a decent property in a hotel — the largest since the New good location, but it is worth if that York Hilton was built 25 years earlier. will allow you to attract superior Trump’s relationships, negotiating skills tenants or buyers. with all roleplayers involved in the deal, as well as his enthusiasm and tenacity The key to making a big profit for the project made it a huge success. and getting better returns on your investment is to pay less than whatSelecting Investment Properties the property is worth. You can doA prime location is important but this by purchasing the property at athere are no guarantees that your price below market-value, buying itinvestment will be profitable. An below the use value, buying belowincompetent investor can own a the conversion value, buying withproperty at a good location but can below-market-costs financing,still lose lots of money. buying with a below-balance payoff, buying with below average Although, according to Trump, operating expenses or buying with“You do not necessarily need the a (short) discounted payoff of liens.best location. What you need is thebest deal.” It all comes down to how much your property is valuated at. When planning on implementing Improve your property to get thea deal for a particular property, you maximum value out of it.must think big. “I like thinking big.I always have,” he says. BEST SECRETS TO SUCCESS ADVICE “To me it is very simple: if you 1 Think bigare going to be thinking anyway, TRUMP’S 4 PRINCIPLES 2 Protect the downsideyou might as well think big,” 3 Maximize your optionsTrump adds. 1 Be willing to pay a premium for a 4 Know your market prime location 5 Use leverage A property in a prime location 6 Enhance your locationclose to essential amenities will 2 Do not buy without a creative 7 Get the word outalways be in high demand by vision for adding significant value 8 Fight backbuyers and tenants. These people to a prospective property 9 Deliver the goodswill always pay a premium price to 10 Contain the costslive in this prime location. 3 Creative problem solving leads to 11 Have fun! big profits You have to avoid the trap oflooking only at the average selling 4 Write a business plan before youprices in your local market, and buybe willing to ‘overpay’ if thisoverpayment is warranted. Inwww.reimag.co.za MAY 2015 SA Real Estate Investor 17

BILLIONAIRE LESSONS CASE STUDY“Think big and live large” TRUMP TOWER Trump thought creatively. He saw this project as a prime location for upscale retailers who are willing to pay annual rents of $500 (or more) per square foot. The high floors of the buildings, will appeal to the rich who value the 5th Avenue address and the expansive views of Central Park and the Hudson River. He believed that the high floors with their beautiful views were ideal for luxury residential condominium units that will sell for high prices. As to the problematic middle floors, Trump envisioned offices but realized he will have to innovatively market them to command the rent levels he wanted. On all points, his ideas succeeded.‘The Trump Touch’ people think about the location inOne of the cornerstones of Trump’s a new way.philosophy is “to improve orenhance any location.” To create more rental income,Trump’s signature style, known create an inviting exterior.as the ‘Trump Touch’, includes “Enhance the perceived value.improving dilapidated buildings Spend money where it creates thewith flashy architecture and a most lasting and emotionally visualglamourous façade. effect,” Trump advises. According to Trump, “Most Create attractive cub appeal.properties have hidden potential. It When prospects arrive, make sureis your job to find it.” they immediately feel, like “This looks like a nice place to live.” I am always trying to figure out,“What can I do with this property What kind of signature, liketo give it flair, pizzazz—something the location, or design elementsmy buyers or tenants cannot find such as the architecture, interioranywhere else?” he adds. design or landscaping can you add to your property that will impress By including these features the your prospective buyers or tenants?property becomes impressive and Know what additional features theydistinctive, Trump thus gets a will pay extra for and what they willhigher premium over similar sized not.properties in the same area. Interiors are also important. You can do this by doing Kitchens and bathrooms sealsomething radical to your property the deal. Extra money spent inby changing the zoning, changing renovating these rooms will reapthe way the property is used, or big rewards either from the salesrenovating it so strikingly that price or the rentals.18 MAY 2015 SA Real Estate Investor www.reimag.co.za

Enhance the location and your BEST “Do not go into a deal withoutproperty by converting a garage, ADVICE first figuring out the power youattic, and loft or mezzanine level posses to solve the other person’sto make extra living space. Convert 3 CARDINAL NEGOTIATING problems,” he adds.houses or apartments into office PRINCIPLESspace Deal making requires 1 Know yourself “accommodation, adjustment, “Attend to the details,” Trump 2 Know the other party diplomacy, and finesse,” whileadvises, “Just like my father, I walk 3 Preparation is key negotiation requires “persuasionevery project. It is my responsibility more than power” and someoneto make everything look exquisite.” with a “razor-sharp mind, who is not a bulldozer.” What Actions Must InvestorsTake? “Think just as hard about your negotiations, strategy and tactics as Trump advises that you evaluate will for the property itself,” Trumpyour properties to find multiple advises.uses, multiple streams of income,or even multiple target markets. In Preparation is key. “I always gothe past, developers will construct into a deal anticipating the worst. Ifan office building, a hotel or a golf you plan for the worst—if you cancourse. Now, use one idea, one use live with the worst—the good willwith one target market. always take care of itself,” he says.Money, Money, Money relationship and only borrow as Get The Word OutBefore you even buy your much money as you can, for as long Before you rent out or sell yourinvestment property and start as you can. property do some market researchimproving it, you need to get to determine what tenants andmoney to finance the property such Negotiating buyers are looking for in a property.as a bank loan. Use your advantages as leverage in Get to know how the location negotiations. “In negotiations, look of your property can benefit the The use of borrowed money for leverage,” Trump recommends, tenant’s or buyer’s lifestyle. Makeserves several purposes: It gives you “What do you have that the other a list of all the unique features ofmore leverage, which enables you person wants? Or, even better, what your property that can differentiateto purchase 20 or 30 times more they cannot do without.” it from other similar properties inthan what can be bought for cash the same neighbourhood.and it reduces your equity exposure.However, remember, do not make Then, promote your property tolong-term investments with short sell these unique features or ‘sizzle’term money. to potential tenants or buyers. Here are a few tactics for Trump advises that you evaluateconvincing your bank manager to your properties to find multiplegive you a loan: uses, multiple streams of income, or even multiple target markets. Make bank lenders want to dobusiness with you by borrowing Now you know Trump’s secretssmall amounts, investing it wisely, to success; how to select a suitablepaying the loan back promptly, and investment property, negotiate withthen subsequently asking to borrow your bank to finance it, think big,more. This approach builds up your use the ‘Trump Touch’ to enhancereputation as a responsible investor it and promote your property toand boost your credit record. successfully sell or rent it.The key is the establishment oftrustworthiness. RESOURCES Borrow money from a lender Ross, G.H. and McLean, A.J. ‘Trump Strategies for Real Estate’ (2005), Johnwith whom you already have a Wiley & Sons. Eldred, G.W. ‘Real Estate 101’ (2006), John Wiley & Sonswww.reimag.co.za MAY 2015 SA Real Estate Investor 19

Your Property Investment Partner, FOR LIFE! www.uniqon.co.za • [email protected]

REI RESIDENTIAL EXPERT Q&ALOWER-SEGMENT PRICE INCREASE DRIVES CRIMINAL SYNDICATESGROWTH IN HIGHER-VALUE CATEGORIES OPERATING IN SECTIONALL ightstone has reported an actual TITLE COMPLEXES price growth rate of 6, 72%, with a steady performance in the Sheree Peachhigher-end markets throughout last Rentals Manageryear. The value of price growth was Renprop Residentialits highest since the 2008 subprimemortgage crisis, with low-value price Q Where do these criminalgrowth leading the pack by just under 30%, followed by properties in mid-value, high syndicates operate?and luxury markets. These syndicates are operating in sectional Although price growth forecasts are pegged at 7, 2% for this year for a potential high title complexes throughout Johannesburg’sroad scenario where growth domestic product grows more than expected, a demand northern suburbs, for which theyfor security in the face of deteriorating crime statistics, and aggravating factors such as fraudulently apply for lease agreementslabour unrest, will pose the biggest threat yet to the property market, as these reduce where they rent a number of units inthe purchasing power of buyers and bank risk appetite in the low- and mid-value different complexes over the same timemarkets. Lightstone therefore forecasts a more realistic residential price growth of period.around 5.8% for this year. Q How do these syndicates con In the higher-value markets, around 60% of property transactions are bonded, with estate agents and landlords?over 85% of bonds granted being for primary loans as opposed to further advances orswitches. Average mortgage-lender loan-to-value of primary bonds range from 82% to These criminals have been very clever in93%, depending on the bank, with deposits of between 7% and 18% required. creating fraudulent documents. It takes a close inspection to spot the discrepancies. Newly registered bond values peaked in the second and third quarters of last year, at It is only when you begin to check thetheir highest since the 2008 subprime crash with financing in excess of R9,5 billion from applicant’s place of employment andStandard Bank, followed by First National Bank with just over R8 billion and ABSA with analyse documents like bank statementsjust over R7 billion. and payslips that you find that the numbers do not add up. At face value they are Tony Clarke assumed to be good tenants because they Managing Director are good payers with clear credit records Rawson Property Group and pay cash upfront for the rental of the unit. StatsSA puts the rate of rental inflation at just 5, 05%. There are however several pockets of high Q How does this affect landlords? demand in Gauteng where rentals are rising faster Generally, the laws governing rental than this – and landlords are making better-than- average returns. agreements offer far more protection to the tenants than landlords, which means Veshad Pooran that getting rid of an undesirable tenant Manager such as these is exceptionally difficult, time Pam Golding Properties Eastern consuming and expensive. Landlords who Johannesburg do not vet their tenants against stringent guidelines are putting their investment at The property Gauteng market in has enjoyed ongoing risk. growth with prices rising by an average 4.6% over the past five years. Property prices here have marginally Q What can landlords do if they outperformed the national average, with average suspect their tenant is part of annual increases of around 5.3% recorded during the these syndicates? same period. While these tenants generally avoid confrontation, they do not want trouble and prefer to fly under the radar. It is best to report it to the police and not to confront the tenants with accusations directly.www.reimag.co.za MAY 2015 SA Real Estate Investor 21

FINANCEGetting CreditNew Regulations Affect How PotentialLandlords Can Access FinanceBY MICHELE DICKENST he National Credit Amendment Act was These members are required to update any defaults, released in March this year after a draft of the which have been settled to a ‘paid-up’status.The default Act was proposed in May last year. There are will then be removed from the tenant’s credit profile.some new regulations, which now govern the way inwhich credit bureaus run and how property investors When obtaining a clearance certificate, the Nationalcan access finance such as a home loan. Credit Regulator (NCR) only allows a potential landlord to apply for a clearance certificate if the The most debated amendment is the introduction landlord has settled all short and long-term debts.of Section 71A, in terms of which credit providers Since a mortgage takes longer to settle (about 15 to 20and credit bureaux must remove any adverse credit years) this means that the potential landlord will haveinformation of a consumer once the consumer has to wait 15 to 20 years to obtain a clearance certificatepaid its debts in full, giving the consumer a ‘clean slate.’ and to be rehabilitated. The Amendment Act hasCredit history or good and bad credit records will be changed this by allowing a landlord to be issued with aa thing of the past. Although, this is good news for clearance certificate once, if the landlord has paid up allconsumers that are struggling to secure homes due to other debt and the only outstanding debt is a mortgagetheir bad credit histories, it is not good news for credit agreement.providers that rely on a consumer’s credit history inorder to determine whether or not to grant credit, how In particular, these new regulations affect the way inmuch credit and at what interest rate. which outstanding rent is collected from tenants. “Credit history or good and The new requirement that the minimum repayment bad credit records will be a installment must be a minimum of three consecutive billing cycles in arrears will undoubtedly lead to longer thing of the past.” periods between actual payment defaults and listing on the credit bureau – (rent and credit) payment profile Two new regulations include the provision for the information is now more valuable than ever. Thisautomatic removal of adverse consumer information new requirement, however, does not prevent you fromand changing the requirements for obtaining clearance taking legal action in the normal course of business –certificates. such as a letter of demand, cancellation of services or court action. All adverse information recorded on a credit bureaumust be removed once the debt has been settled. Imagine a school, which has quarterly payment cyclesMembers who submit their adverse information – no adverse listing may be loaded on a credit bureau(defaults) to the credit bureau are required to inform unless three consecutive quarterly payments have beenthe credit bureau within seven days of their tenant missed either in full or in part. Albeit no adverse listingsettling the amount to which the default relates. may be loaded, the payment profile indicating the non- or partial payment may still be loaded. RESOURCES Tenant Profile Network (TPN) Rent Check, ‘National Credit Amendment Act’ (August 2014), KPMG22 MAY 2015 SA Real Estate Investor www.reimag.co.za

LEGAL ConThue VnATdrVeundmor Can A Vendor Be Charged With The Common Law Crime Of Theft? BY GRAEME PALMERT he basic principle of Value Added Tax (VAT) It was the State’s argument that a vendor acts as is that a vendor must account to the South an agent for SARS when collecting VAT. It therefore African Revenue Service (SARS) for output follows that a vendor who uses VAT for a purposetax on supplies made after deducting any input tax other than to pay SARS, misappropriates those fundsincurred. and is guilty of theft, despite the fact that the vendor may be the owner of that money. In other words, the However, can a vendor be charged with the common vendor is in a position of trust in relation to SARS withlaw crime of theft, if this vendor collects the VAT and regard to the money collected.does not pay SARS, but uses it instead for anotherpurpose? This was highlighted in the following court Disagreeing with the State’s argument, the SCAcase; the Supreme Court of Appeal (SCA) in Director held that the relationship between a vendor andof Public Prosecutions, Western Cape versus Parker. SARS was one of a debtor and the vendor as creditor. This is supported by the civil remedies available to“It was the State’s argument SARS to recover tax debts in Chapter 11 of the Tax that a vendor acts as an Administration Act, 2011. While the relationship agent for SARS when created between a vendor and SARS in the VAT Act collecting VAT.” is unique, it does not confer upon a vendor the status of a trustee or an agent of SARS. If this was the case, It was common cause that Parker did not pay the the vendor will have to keep separate account booksVAT he had collected to SARS. He was initially or be sufficiently liquid at any given time to cover theconvicted on 16 counts of theft in the Magistrates outstanding VAT.Court and sentenced to five years imprisonment. Onappeal the State explained that, although failure to pay The Court concluded that the VAT Act does notVAT was a statutory crime in terms of the Value Added incorporate theft as an offence. If the State finds theTax Act, 1991, it was punishable with only a two-year sanctions inadequate the obvious solution is for themsentence. In contrast, a conviction for theft allows for a to approach the Legislature to have them changed,far harsher sanction. however, the SCA was not prepared to extend the crime of the theft to resolve the State’s difficulties. RESOURCES Garlicke and Bousfield Inc.www.reimag.co.za MAY 2015 SA Real Estate Investor 23



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STRATEGIESThe Business OfBuy-To-LetThe Buy-To-Let Business SystemBY KOOS DU TOITAll successful businesses are based on a proven through a Scorecard Evaluation system and access to system. This system details and documents the pre-screened investment properties. processes and procedures in a business, in astep-by-step way that anyone can follow.It eliminates or They are further supported by easy-to-use softwaresolves, efficiently, the many daily frustrations, recurring for financial decision-making and cash flow planning,obstacles and major risks that prevent business success. access to a P3 Bonds which specialises in obtaining multiple bonds for investors, and a personal mentorThe power of a proven system to guide them every step of the way. In addition, P3The power of a proven system is evident in the fact members benefit from the bulk buying power of thethat franchised businesses deliver an astounding 97% group, including discounts negotiated with insurers,success rate, while less than half of non-franchised conveyancers and property developers.businesses in South Africa survive the first five years.The reason is simple: a franchised business simply “Franchised businesses deliverrequires duplicating a system that has already been an astounding 97% success rate.”proven successful. Better than a franchise Another case in point is the P3 Investment System, However, while the P3 Investment System delivers allwhich has certainly proven its worth as thousands of the benefits of a franchised business, it does not entailP3 property investors have weathered the ravages of the the many disadvantages, such as the high initial costs ofgreatest recession in living memory, largely unscathed. a franchise, the ongoing management service fees andThis is because their investments were made according royalties payable, or the many restrictions on how theyto a tried-and-tested system that encompasses a simple run their businesses.step-by-step approach to ensure mistakes are avoided;the right tools are used to implement the processes and Instead, for less than the cost of a meal for twoprocedures correctly; and support is given to ensure per month, P3 members have access to the proveninvestors maintain momentum and manage their P3 Investment System, along with all the tools andbusinesses prudently. assistance required to produce superior performance and consistent results.It allows ordinary South Africans,Step-by-step earning average salaries, to establish a successfulP3’s property investors simply follow the P3 Business business, without qualifications or experience, capitalManual, which details the tried-and-tested 12-step or infrastructure, or much time, training or effort. YetP3 System. To maximise their success, P3 members this generates ongoing inflation-linked income andoperate according to a personalised business plan, steady capital growth, through a proven step-by-stepcalled a ‘Roadmap to Wealth’. These investors enjoy system that virtually guarantees success.professional assistance in setting up the correctstructure for their business, establishing risk mitigation RESOURCESstrategies, as well as selecting the right investments P3 Investment Group26 MAY 2015 SA Real Estate Investor www.reimag.co.za

Become anAsset ownerImagine owning multiple investment properties:• Inflation-linked passive income • Fulfil your dreams streams for the rest of your life • Carefree early retirement • Leave a legacy• Financial FreedomThe P3 Investment Club specialises in:• Teaching ordinary citizens how to become Asset Owners• Helping our club members to create multiple income streams with a carefully selected property portfolio• Finding the best investment properties in SA for our club members• Showing club members how to maximise returns and avoid risks• Sharing our knowledge and experience through seminars, books, workshops and purpose built softwareJOIN THE P3 INVESTMENT CLUB!Attend a free P3 Property Wealth Seminar.Book at: www.hope.co.za or phone 086 100 7729

STRATEGIESInflationRisk Risk Management In Buy-To-Let BY KOOS DU TOITF ew investors truly appreciate the devastation means that in seven years’ time, the value of R5 will be inflation inflicts on the performance of their half of what it is today and will only buy you a quarter investments. Managing this risk – or hedging of a loaf of bread.against inflation – is crucial to ensure a financiallysecure future. Understanding the impact The second step in managing inflation risk is toUnderstanding inflation understand its devastating impact on your financialThe first step in managing inflation risk is to understand future.it. Inflation is often understood as the rate at whichprices of goods and services increase, but in reality the “The effect of inflation iseffect of inflation is far more destructive: it erodes the far more destructive: itpurchasing power of money. erodes the purchasing For example, a few years ago, a loaf of bread cost power of money.”R5. Today, a loaf of bread costs more than R10, whichmeans R5 will now only buy half a loaf of bread. While Let’s say that your retirement fund projects thatit seems that inflation has increased the cost of bread, you will have R22 million by retirement in 40 years’the truth is that it is not the loaf of bread that has time. What that R22 million will be worth in 2055 willbecome more expensive, it is the value of R5 which has depend greatly on the average inflation rate over thehalved. This means that you need twice the amount of next 40 years. If inflation averages 8% over the nextmoney today to buy the same loaf of bread you bought 40 years, a R22 million retirement fund in 2055 willa few years ago. be equivalent to receiving around R850,000 today. That In financial circles, this is referred to as the ‘timevalue of money’ - the very real phenomenon that thevalue, or purchasing power, of money halves aroundevery seven years, depending on the inflation rate. This28 MAY 2015 SA Real Estate Investor www.reimag.co.za

means that in 40 years’ time, when you retire, you will NEALE PETERSEN’Sbe able to buy with your R22 million retirement fundwhat you can buy with R850,000 today. Even if the MASTER MENTORINGinflation rate averages at a low 5% over the next 40 PROGRAMMEyears, R22 million will have the purchasing power ofjust R2.9 million today. YOUR EXCLUSIVEHedging the risk ACCESS TOThe third step in managing the risk is to choose MENTORSHIP!investments that provide a hedge against the ravagesof inflation. For buy-to-let property investors, this “Formal educationcrucial third step has been already been taken care of. will make you a living; self-education will make This is because buy-to-let property investmentis one investment that has proven to outperform you a fortune”inflation. Firstly, property price growth, whileexperiencing short-term fluctuations, continues to Jim Rohnkeep pace with inflation over the long term. In fact,it is widely recognised that inflation boosts physical For more info contact 0861 ACT NOW!asset prices like gold, silver, oil and property. Secondly,and similarly, the monthly rental income generated www.nealepetersen.comby a buy-to-let property keeps pace with inflationyear after year, as the rental increases annualy by the MAY 2015 SA Real Estate Investor 29amount stipulated in the lease – generally 10% - or atleast the inflation rate. This means that the income ishedged against inflation and will still have the samepurchasing power - the rental of an average property– in seven years’ time, in 14 years’ time and in 70 years’time. Buy-to-let property provides a real hedge againstinflation, ensuring the value of your investments donot halve every seven years, but rather maintain andgrow their value, regardless of what the inflation ratemay be. RESOURCES P3 Investment Groupwww.reimag.co.za

MANAGINGPowerCutsAre Trustesss Allowed To CutElectricity Supply To Residents Units?BY MICHAEL BAUERI n many sectional title schemes there is an but because body corporates or trustees are not the ongoing problem of short payment or non- licensee or the distributor, they cannot cut the supply payment of levies, and it sometimes happens to any section.that the trustees decide to take matters into theirown hands by disconnecting the electricity supply to Trustees have to deal with the non-payment ofthe unit inhabited by the non-payer. This, however, levies as provided in the Sectional Titles Act, which inis illegal if they have done so without a court order sections 37 (2) and (2A), states that the body corporateauthorising this. can deal with the non-paying owner in the magistrates or High Court. In South Africa, legislation is clear in that shuttingoff services such as electricity without a statutory right Body corporates do, however, sometimes take theto do so is an offence. law into their own hands by cutting off the electricity supply themselves because they see this an effective The supply of electricity is governed by the Electricity and quick way of dealing with the situation. In mostRegulation Act 4 of 2006 and section 22 deals with cases these trustees get away with it because the ownerthe powers of the licensee. Only the holder of the will most likely not have the financial means to takelicense which is granted by the Regulator is allowed them to court.to disconnect the electricity supply to a unit – and thismust be for non-payment of the electricity, not for any The recourse owners will have in future if they findother outstanding amounts. themselves in situations such as these, will be to go to the Community Schemes Ombud, who will be able to “Shutting off services such as assist those who do not have lawyers and cannot afford electricity without a statutory expensive court fees. right to do so is an offence.” The key is, however, for owners to pay their levies in Only bulk suppliers of electricity such as Eskom or full, which will alleviate the stress trustees have to goa subsidiary such as your municipality (for example, through in managing and juggling funds when they doCity Power) or the local suppliers can disconnect the not receive payments. Withholding levy payments putselectricity supply after notice is given to the resident, the scheme in a precarious financial position. Leaving trustees to often have the arduous task of sorting out collections of funds way after they are due. RESOURCES IHFM30 MAY 2015 SA Real Estate Investor www.reimag.co.za

SCAM ALERT Rental Scams Beware The Phantom Landlord BY DEXTER LEITEConsumers are cautioned to be aware of what estate agent and agency you are dealing with actually may be termed the ‘phantom’ landlord. There exists, that they are registered with the Estate Agency are an increasing number of scams or potential Affairs Board (EAAB), and that they hold a validscams perpetrated on aspirant tenants. Fidelity Fund Certificate. This is not only to the detriment of the potential If it sounds too good to be true (ie. if the rent istenant, who is then significantly out of pocket, but also too low for the property) it probably is. You are thendamaging to the legitimate rental property industry. advised to proceed with caution. It is best to engage the services of a reputable estate agent. Then verify ‘Ghost’ rental agents or agencies advertise rental that the agent you are dealing with is in fact linkedproperties via websites or print media. These are to the agency that they claim to represent, by callingusually pegged at well below market-related rentals, the agency or checking the agent’s credentials on thewith the units situated in popular apartment blocks EAAB’s website.or schemes. This has the result of inducing potentialtenants to pay so-called deposits and rentals, and sign “Check that the estate agentbogus lease agreements quickly - on the basis that the and agency you are dealingtenant believes that they are competing with a numberof other tenants for the same property. with actually exists.” Having signed the lease, the tenant returns it to Insist on viewing the premises before committingthe bogus agent, who ostensibly has it, signed by a to anything and on meeting the estate agent in person‘phantom’ landlord, upon which event the tenant parts whenever possible, unless of course you know you arewith their money, never to hear from the ‘agent’ again. dealing with a credible estate agent. The tenant thus has not secured any real right to the When in doubt, do not proceed until you are certainpremises. In some cases the deposit and first month’s and satisfied in all respects regarding the tenancy onrental are ostensibly paid to ‘secure’ the premises offer.without a lease having been signed by the parties. RESOURCES In some instances, the bogus agent cites the actualowner of the property as the landlord. Someone acting Pam Golding Properties Western Cape Metro regionor purporting to be the landlord perpetrates this scam.In other words there is no estate agent involvement. In order to ensure that potential tenants do not fallfoul of these scams, it is advisable to check that thewww.reimag.co.za MAY 2015 SA Real Estate Investor 31

STRATEGIES10 Ways To Become AProperty Multi-MillionaireBecome a Property Multi-Millionaire… Part 1BY JASON VORSTERA nyone can see that, with interest rates at their 2. Be patient current level, money in the bank is going to However, assess all the pros and cons of an investment grow so slowly that it might as well be kept before jumping in. Remember that property is a long-under a blanket. Property prices, by contrast, are rising, term game, and if you want to make money from it,and outstripping inflation. never put yourself in a position where you are forced to sell. All that might change, of course. But anyone whohas been tempted to release capital from their money How many buy-to-let investors commit hastilypots, and wants to put the money to good use, not just to a purchase after listening to the sales pitch from ablow it on extravagances, will be mad not to include developer? Talk to local letting agents before taking theproperty in their long-term financial calculations. plunge. Here is a 10-step guide to becoming a property 3. Don’t put all your eggs in one basketmillionaire, it is hardly fool- proof or risk-free, but it As with stocks and shares, a diverse property portfolioincorporates practical tips: is much more likely to weather financial turbulence than one relying on a single, bold gamble. The potential “Assess all the pros and cons return on that waterfront property in Knysna may look of an investment before mouth-watering, but if the Garden Route lets you jumping in.” down, it is nice to have a student buy-to-let in Hatfield to fall back on.1. Target apartments rather than housesInvestors who put money into apartments generate 4. Look for ways to add valuegood returns. Apartments make better buy-to-let One of the best ways to make money out of a propertyinvestments than houses. If your budget will stretch is to add value to it. Even seemingly unglamorousto a two-bedroom, two-bathroom apartment go for purchases can prove lucrative. For instance, considerit. The second bathroom sounds unnecessary, but the an apartment above a shop with potential for a loftmore flexible your buy-to-let property is, the better. conversion. 5. Become tax-efficient You will never become a property millionaire if you pay32 MAY 2015 SA Real Estate Investor www.reimag.co.za

the taxman more than you absolutely have to. There aremany ways to keep your tax bill down, and you musttake full advantage of them if you want to achievemaximum capital growth.6. Exploit local knowledgeIt sounds obvious, but when buying a property, it isnot going to be easy to spot a bargain from anothercity. Research the property and the neighbourhood.Ask questions to find out if the property is reasonablypriced, about schools, transport and other amenities.7. Start at homeAre you nearing retirement age and living in a tired anddilapidated family house that is too big for you? Thenconsider breaking it up into two or three apartments.You can keep the ground floor for yourself and usethe others as the first building blocks in your propertyportfolio. It makes obvious financial sense to release someequity from your biggest asset, and you will be wellpositioned to oversee the newly created flats.8. Find professional partners you can trustUnless you are a financial wizard with a law degree andadvanced DIY skills, you are going to need professionalhelp in building your property portfolio. Pick the right partners with expertise in theirchosen field. Finding dependable builders, lawyers andaccountants is not only the key to maximising yourprofits, but will offer you peace of mind too.9. Is there cash in your attic?If you are thinking of selling your main home to raisecapital and kick-start your portfolio, consider makingvalue-adding improvements. Assuming you have notemployed a cowboy builder, an extension can add fiveto 10% to the value of a property.10. Take advantage of low mortgage ratesTurning an initial investment of R200, 000 into aR1 million portfolio is certainly achievable if you doyour homework. One possible strategy is gearing.Property unlike other assets can be geared by meansof a bond, therefore increasing the investors return ontheir capital outlay, which can be small. RESOURCES Just Investwww.reimag.co.za

FINANCEAuditingSeasonFive tips to make youraudit hassle-freeBY LOUW LIEBENBERGT he end of February marks the start of audit Many estate agents do not have a current FFC to season. According to the Estate Agency Affairs show their auditor. Advise the auditor early if you do Act, agencies have four months from the end of not have this.their financial year to submit the results of their audit Ensure you read the full report and understand the fullto the Estate Agency Affairs Board (EAAB). Failure content thereof to proactively deal with any issues theto do so can result in an agency not being granted a EAAB may identify.Fidelity Fund Certificate (FFC). Here are five crucialelements for hassle-free submissions: “The owner of the estate agency remains responsible1. Make sure you are using an auditor for the outputs of the audit.”Only an Independent Regulatory Board for Auditors(IRBA)-registered auditor who has Category Ccertification is allowed to perform an audit on a trustaccount.2. Prepare 4. Make sure the paperwork is perfectHave all information ready for your auditors. The The EAAB has issued a standardised form for auditors.documents to have available are: Ensure your auditors use the correct form – two years ago the standard one-page submission was changed to• Evidence of your registration with Financial a form of six pages. Intelligence Centre (FIC) 5.Make sure your submission is done on time The deadline for submission is 30 June this year• An updated accounting system that provides all (if your financial year-end is February). From this year monthly reconciliations the EAAB will only accept electronic submissions via its audit portal at www.eaab.org.za/myaudit. Ensure• Copies of all leases, mandates and invoices you can prove a timeous submission by printing a copy• Breakdowns of all staff payments and of the confirmation of submission. commissions Delays in obtaining IT3b information from banks,• Proof of all expenditure in turn often cause delays in the submission of audit report to the EAAB. It is much better to submit aRequest an IT3b on interest declaration from the bank report without the IT3b (specifying that it is to follow)as early as possible. than suffering the consequences of late submission. Scan all documents and store them electronically It is the owner of the estate agency’s responsibility tothus you can easily share this folder, rather than paying ensure the audit is done fully and submitted timeouslyfor the auditor to come to your offices. to ensure the financial safety of your business.3. Be part of the process RESOURCESThe owner of the estate agency remains responsible forthe outputs of the audit. If there are adverse findings, PayPropincorrect information, late submission of forms, it isnot the auditing firm that is held responsible.34 MAY 2015 SA Real Estate Investor www.reimag.co.za

RESIDENTIAL STATSResidential Property Stock The Bonded Valuation of Different Residential Property Typeswww.reimag.co.za P roperty stock in the R7, 8 million price brackets are split into two segments; in which 78% is residential stock and 22% is non-residential stock. Meanwhile, property stock in the R6, 4 trillion price bracket includes 66, 9% of residential stock and 33, 1% non-residential stock. These segments are further split up into types of properties. This property stock is made up of 82, 8% of properties in sectional title schemes, 12% is in free hold property and 5, 2% in estates in the R6, 1 million-price bracket, which is over the annual growth domestic product. However, property stock in the R4, 3 trillion price bracket includes 69, 9% of free hold property, 15% in estates and 15, 1% in sectional title schemes. This is made up of 56% of residential free hold properties are in the R3 million of more price bracket, 35% non-residential estates and properties in sectional title schemes make up only 9% in the R3 million or more price bracket. 34, 6% Of bonds were granted for properties in the R6, 1 million-price bracket whereas 65, 4% of bonds were not granted. Meanwhile, 52, 5% of bonds were granted in the R4, 3 trillion-property market but 47, 5% of bonds were not granted. 36% Of bonded properties were valuated between R250k and R500 000, the highest in the R6, 1 million price bracket, whereas 8, 6% of bonded properties were in the lower R3, 000 000 market. 36% Of bonded properties in the R6, 1 million price bracket are worth between R1, 500 000 and R3, 000 000. While the 19, 4% of bonded properties are worth less than R3, 000 000. 6, 2% Of bonded properties are in the R4, 3 trillion price bracket. RESOURCES Lightstone Property MAY 2015 SA Real Estate Investor 35

ACQUIRINGInside the mind of aValuatorFinding The Value Of AnInvestment Property… Part 2BY RICHARD WADEA fter having followed the guidance in Part produce income and how stable that income will be 1, you have located a suitable investment over the term of a lease. The larger and older a tenant is, property and have a tenant paying a market- the easier it is to assess, a proprietary company formedrelated rent. You will now want to know how much to last year is a difficult proposition.pay for it. To do that, you need to divide the marketrent by the yield (or capitalisation rate, or ‘cap’ rate, The locations with the least risky yields are urban,depending on terminology). How does the valuator not rural locations. Generally, the more modern ainspecting your property assess the yield? building, the less it will cost the landlord to maintain, hence a lower yield. To a valuator, the yield is all about quality: location,structure and tenant. The best point to start is prime “The yield is all aboutyields, the best in all three categories. As examples, we quality: location, structurewill take the new head office of Discovery in Sandton,scheduled for completion in 2017, and FNB’s new and tenant.”Portside building in the Cape Town Central BusinessDistrict (which happens to not be an investment There are, of course, complications in larger multi-property, but the principles are the same). Both of these let properties. A valuator will add 1% to the yieldnew buildings are located in the densest commercial for sub-letting properties because they are normallyparts of their respective cities, both have or are aiming unattractive. This will reduce the price of the buildingat achieving five-star ‘green’ rankings and both have and increase demand. The rent pattern is importantoccupants that have strong profitability, liquidity and because yields are higher if rent is taken in advancebalance sheets. As yield is the inverse of rent, the lower instead of in arrears.the yield, the higher the value the valuator will assign.In an ideal world, you want a quality asset and high Valuators are nothing if not commercial. Most goodyield, but where do you strike the balance? valuators must be able to exercise an independent view and their conclusions must aid the property investor Like income, yield is not solely a product of location. and not hinder him. However, they are not fortuneMost important will be the quality of the tenant. A tellers; as they say, the impossible we do at once,valuator will want to examine the accounts of the miracles take a little longer.tenant (or tenants) to see how financially sound theyare. Think of a valuator as a nicer version of your RESOURCESbank manager – the latter only looks to see if you canrepay him, but the valuator will check if the tenant Horizon Valuationcan repay you and he does this through a knowledgeof accounting and business acumen, how businesses36 MAY 2015 SA Real Estate Investor www.reimag.co.za

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LEGALPOPIand YouPOPI’s Impact On TheProperty IndustryBY MARLON SHEVELEWT he Protection of Personal Information Act Once this information is to hand, POPI dictates (POPI) – Number 4 of 2013 – and its impact how such information may be stored, recorded, used on the rental property industry cannot be and disclosed, not to mention the duty to have highunderstated. Whilst sections and clauses, that will standards of security in place from an IT point of view,directly impact the industry, are still incrementally when storing information electronically, whether in thecoming into force, it seems it is an opportune time to cloud or on the agent’s own IT systems.remind the property industry about POPI’s potentialimpact. The agent must also protect a tenant’s (or potential tenant’s) personal information in its custody or control The aim of POPI is to protect privacy collection, by adopting safeguards to prevent unauthorisedretention, dissemination and general use of personal access, use, disclosure, loss, destruction, copying orinformation. modification of any personal information. In short, a rental agent must be careful when POPI is quite clear that the tenant’s consent needsscreening tenants or entering into leases with tenants to be obtained before disclosing personal information- of every individual’s right, as well as every company’s to third parties (with certain exceptions, such as stateright, to privacy. The legal right of privacy is based security).on Section 14 of the Constitution of the Republic ofSouth Africa. “POPI dictates how such information may be stored, ‘Personal Information’ is widely defined in POPI recorded, used and disclosed.”and includes, inter-alia, race, a name, date of birth,phone number (home and cellular), work and home To conclude, non-compliance with POPI canaddress, identity number, passport number, banking potentially lead to claims for civil damages (includinginformation or income (of a company or individual), punitive damages), administrative fines of up to R10gender, contact details, personal opinions, private million or criminal prosecution where unlimited finescorrespondence, financial information, and any other and imprisonment of between one and 10 years areinformation which is deemed to be personal. Personal prescribed, so be sure to engage an attorney practicinginformation applies to tenants (and, in fact, all people in this field to guide you accordingly.and entities) who are both companies and individuals. RESOURCES There is an inherent duty to process informationlawfully and reasonably when screening the potential Marlon Shevelew and Associates Inc.tenant. This is done in a manner that does not infringeon the privacy of that tenant (individual or company)by gathering as little information as possible, under thecircumstances, with the consent of the tenant.38 MAY 2015 SA Real Estate Investor www.reimag.co.za

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UNIQUEPROPERTYINVESTMENT OPPORTUNITIESWho we areProperty Assist was established by financial, legal, investment and property specialiststo provide alternative solutions and investment opportunities specific to the propertyindustry. Our multi-faceted solutions, provided within a strong regulatory frameworkand which is regulated by the EAAB, is unique and unequalled in the South Africanmarket.What we offer to property investorsDiscounted property with predetermined profitProperty Assist provides the full turnkey solution facilitating procurement, riskassessment, maintenance, property management, transfer, rental and re-sale, within astrong legal and financial governance framework and offers the property investor:• diversification within the property market• advantage of property Investment without the administrative burden• fixed predetermined contractual returns• an effective tool to hedge returns against downturns in the property market• higher than market related returns, with lower than market related risk• assisting property owners who are in distress whilst achieving high ROISalient features of the transactions include:• Purchase cost to market value exposure of 70% or less• Total exposure includes all transaction and transfer costs• Property is transferred to the property investor• Transfer of properties are handled by reputable panel attorneys• All funds are managed through attorney’s trust accounts• Bond financing is available through all major banks or alternative funding institutions• Unique buy to let and buy to sell property investment opportunities available• Annualised yields on transactions from 17% upwards Property Assist (Pty) Ltd 2012/219280/07 Office 101, 1st Floor, Edward 111 Building 70 Edward Street, Bellville, 7530 021 201 5344 • www. propertyassist.co.za • [email protected] PLEASE REGISTER ON OUR WEBSITE TO RECEIVE MORE INFORMATION

REI COMMERCIAL EXPERT Q&A BEE TRANSACTION GAINS OVERWHELMING RESPONSEBALLITO JUNCTION MALL DEVELOPMENT GETS GREEN LIGHT Rob Kane CEOT he re-development of Ballito Junction regional shopping centre has been given the go-ahead by the local KwaDukuza Municipality. Texton The approved Site Development Plan (SDP) for the 65,000m2 mall projectwill see the existing mall being extended by more than six times its current size. Q What does this BEE transaction entail? “Getting the green light means we can commence with the re-development ofBallito Junction into the dominant regional shopping centre on the Kwa-Zulu Natal Texton Property Fund’s shareholders have(KZN) North Coast. This exciting development will see the existing 10,000m2 centre given their overwhelming support to thebeing overhauled and extended to 65,000m2,” adds Patrick Flanagan, Executive broad-based Black Economic EmpowermentDirector of Flanagan and Gerard Property Development. (BEE) deal which was announced in December last year. This transaction, Menlyn Maine and Flanagan and Gerard Consortium, acquired the Ballito Junction together with the investment by P D Naidoosite and surrounding 10ha undeveloped prime property from ABSA Bank. of PDNA Property Investments in May 2014, will result in a total black ownership of The consortium officially took transfer of the property in November last year. approximately 25% of Texton.“At R1.4 billion, this is a massive investment not just in Ballito but KZN. While thisinitial investment will take the mall to 65,000m2, development rights that exist on Q What has been a critical elementthe site allow for the centre to be further expanded to 90,000m2,” says Menlyn Maine of this deal?Director, Carl Jankowitz. Selecting the right BEE partners has been Construction on Ballito Junction is anticipated to take about 24 months. a critical element of the deal. We are veryThe new mall is scheduled to open in the first quarter of 2017. pleased that we have secured a strong consortium that is not only broad based The KZN North Coast region is regarded by many as one of the most significant in terms of gender and reach into ruralurban growth areas in South Africa, having been bolstered by the relocation of the communities, but offers us expertise andDurban airport. Boomtown Ballito is just 10km away from King Shaka International extensive business networks in the propertyAirport and the Dube TradePort development. sector. Darren Wilder Q Who are the new BEE Consortium’s CEO shareholders? Fairvest Property Holdings Limited The BEE Consortium’s shareholders Fairvest has entered into an agreement to acquire comprise of Zava, Jade and Ditikeni. Zava two key shopping centres, Middestad Centre and is a black owned, managed and controlled Mega Park. Middestad Centre is a 19 943m mall, diversified investment company. Jade is located in Bloemfontein’s CBD. Mega Park is a 5 a 100% women controlled and managed 963m mall located in the South Western Quadrant of investment holding company. Ditikeni, Bloemfontein. Fairvest’s strategic focus is on retail meanwhile, is an investment holding group properties in the high growth, lower LSM consumer with 19 shareholders, which are non-profit market. organisations involved in rural poverty alleviation, feeding schemes and AIDS James Wilson actions. CEO Amdec Q How has the transaction structure been designed? We take a multifaceted approach to sustainability and energy-efficiency. We intend to pursue more The transaction structure has been designed Green Star SA ratings for all our new developments, to incentivise the BEE parties to add value and some of our existing ones, we are also adding to the Fund, by bringing assets to Texton, more resource-efficient features to all our assets. This and to secure long term leases. In addition, helps take strain off our power grid and our building there will be meaningful skills transfer and users’ pockets. economic uplift. We look forward to a close and fruitful working relationship with ourwww.reimag.co.za new partners. MAY 2015 SA Real Estate Investor 41

ACQUIRINGBuyingCommercial Property?Avoid these five costlymistakesBY ATTIE ANDERSONB uying commercial property is a long-term employees or clients. This can be detrimental commitment and a major investment for any because you can end-up investing more resources in business; therefore, such a decision needs to transport or losing talent due to the inconveniencealign with the businesses’ growth objectives. of the business location. Similarly, you want to ensure easy accessibility for your clientele since this “Being in a position to buy commercial property has a direct impact on the future of your business.is an exciting phase for a business as this creates new There needs to be a fair balance.possibilities. In some cases, commercial property buyersmake impulsive decisions based on emotions rather “The objective is to makethan sound business objectives. During the decision- substantial profit from themaking process, it is important to remain focused onbusiness needs and not overlook the finer details which sale of the property.”can have long-term limitations on business growth,”says Attie Anderson, Head of Business Lending of 4. Do not overpayFNB. The objective is to make substantial profit fromPaying attention to some of the following areas can the sale of the property. This is why commercialhelp commercial property buyers avoid costly mistakes: property buyers need to understand and research the potential value of their targeted property to1. Commercial use, title deeds and town planning negotiate a reasonable price. Banks play an essential restrictions role in this regard because they use independent property evaluators to ensure the buyer has a good Ensure the property is zoned for commercial idea of the property’s value. use and investigate any potential town-planning restrictions for the chosen area. This will give you 5. Understand upfront and ongoing costs a good sense of whether your business can face There are upfront costs that need to be settled by growth restrictions in future. the buyer during a commercial property transaction.2. Size of the property must accommodate business These include transfer and registration costs which growth largely depend on the sales price. “Acquiring commercial property is a Depending on the type of business, you need to significant step in the life cycle of any business consider the business’growth potential and whether and it is important to ensure all factors are taken the targeted location can accommodate such into consideration. Business owners must enlist all growth. It is not advisable to buy property only to the necessary help to ensure they make the right sell it a few years later because you can potentially decision, especially in view of the long term nature lose money. Sourcing new properties comes with of property investments,” concludes Anderson. additional costs such as agent’s commission and transfer costs.3. Location and accessibility RESOURCES A location might be better suited to the business First National Bank (FNB) but not necessarily convenient or accessible to42 MAY 2015 SA Real Estate Investor www.reimag.co.za

FINANCE New Property Funds launched New Funds To Drive Entrepreneurial Investment BY NAZEEM MARTINT wo new specialised Small and Medium preferably in metropolitan areas – will be considered Enterprise (SME) Funds for the property for this fund. sector, namely a Property and PropertyJoint Venture Fund, both aimed at driving property Property investors are able to play an active roleownership and enabling entrepreneurs to grow their in managing the investment, but can choose to beequity base have been launched. a passive investor. The Fund will consider a viable property investment that has been over-geared and The Business Partners Property Fund makes R200 requires a restructuring of the existing debt, convertingmillion available to provide affordable finance for from a debt to equity finance model.SMEs across all industries, allowing business ownersto purchase or refinance their own business premises. “Business owners can save upNo deposit is required for this type of funding, and the to 50% over a decade on theFund will offer 100% financing to qualifying businesses. costs of premises.” “Generally, conventional financiers require a cashdeposit before financing a property deal. The Property The specialised funds form part of the company’sFund will cater to entrepreneurs with viable operating Square Peg Movement – a campaign aimed atbusinesses, in existence for over three years, who wish providing further funding, support and mentorship forto purchase their own premises but who have limited entrepreneurs with the aim to unleash South Africa’scapital or security to contribute, or who do not want SMEs. The campaign, launched in September last year,to compromise their business’ cash resources for the will see the company introduce a series of specialiseddeposit,” says Nazeem Martin, Managing Director at funds, each focusing on the up-liftment of a particularBusiness Partners Limited. local sector. To date, a R300 million Manufacturing Fund has been launched. Calculations show that by purchasing property fora business premises, business owners can save up to “With the launch of these new funds, we seek to50% over a decade on the costs of premises, without achieve a greater developmental impact in the localcompromising the business’ cash resources. SME sector. This ensures local entrepreneurs are able to play their vital role of generating wealth, growing Meanwhile, the R250 million Business Partners the economy and creating jobs,” concludes Martin.Joint Venture Property Fund will provide equity orterm finance, or a combination of both, for the purchase RESOURCESof a multi-tenanted commercial, industrial or retailproperty valued between R2 million and R120 million. Business Partners Limited Property investments in good, risk adjusted locations– those offering good growth and return on investment,www.reimag.co.za MAY 2015 SA Real Estate Investor 43

MY STORYAfrica’s Leading Entrepreneurand Property MogulTrendsetter And InnovatorBY NEALE PETERSENT ebogo Magashoa (39) is a visionary conceptualized in 2003. It is located in Alexandra, entrepreneur, and property investor. He Johannesburg, which is the oldest township in South is currently Chairman of Talis Holdings Africa, with a history spanning some 103 years.Group, a company, which has diversified investmentsinto property, finance, infrastructure development, The development was eventually completed, realizedagriculture, vehicle fleet management, ICT and mining. and launched with an official opening on 24 May 2009. It was the first integrated sub-regional township The subsidiaries of the Talis Holdings Group mall and transport facility in South Africa. Two otherinclude Tebfin a financial services provider, Talis high profile township developments Protea Mall andproperty developments, Cloudseed a leading Internet Maponya Mall were developed and completed soonservice provider and Fleetmatics VMS, a specialist in afterwards.fleet management and vehicle tracking. He qualified asan electrical engineer, which has helped him grow his Tebogo started the development process with manyproperty development company into the success it is challenges including no major partners or institutionaltoday. funding, only a passion to make a difference in the community. He needed to get the community behind His role model includes Deng Xiaopeng, who led him to get complete buy-in for the taxi facility.the economic reform in China by pulling the countryout of dire economic straits and making it into an The historic site of the mall is a traditional meetingeconomic super power. point for the people of Alexandra. This site is also a major public transport node with over 2000 taxis.Where the property bug started Tebogo funded the participation of the taxi associationsTebogo’s foray into property all started with the in the development, as a way of aligning their interestsdevelopment of the Pan Africa Mall, which was first to that of the developments. This turned out to be the best decision he made with regard to getting key44 MAY 2015 SA Real Estate Investor www.reimag.co.za

buy-in since they are responsible for bringing the feetinto the development through their transport business.This led to a seamless ecosystem whereby the retaildevelopment has benefited substantially out of thetransport business of the taxi associations. The mall was self-financed by Tebogo throughequity funding while he secured bank finance for theremaining debt. The Pan Africa Mall has proved to bea great success for tenants, consumers, community andinvestors alike with prime anchor tenants such as Pick‘n Pay, Edcon Group and McDonald’s. It has alreadyincreased the size of the Gross Letting Area (GLA) to25,000m2 in 2012 to attract more high profile tenantssuch as Truworths and Mr. Price. Foot traffic and tradedensities have been some of the highest recorded inSouth Africa to date.Lessons learned Tebogo is looking at options in Africa but is veryHis first big lesson was getting community buy-in as he selective as to where he wants to grow. He is searchingfound that key stakeholder engagement breed’s success for land to develop and already owns 1600 hectares ofin development in emerging economies. Secondly, he land in Angola and Democratic Republic of Congo.had to convince tenants and the banks that this will The plans are to develop for the local market to servebe a viable project for a newbie developer. Lastly he a real need.had to get the right contractor. Normally this kind ofproject will be ideal for the larger first tier construction He continues to follow his passion in life to respondcompanies but all the big companies were tied up on to the needs of society, be it in the retail, commercial orWorld Cup stadium projects at the time. He eventually housing space.appointed a medium-sized construction firm calledAdamson and Neilson. TEBOGO’S 10 BASIC INVESTMENT TIPS: Tebogo differentiates himself by not just investing 1) Pick the right site, the money will soon follow.and developing in commoditized properties but rather 2) Make sure the development is tenant driven.targeting property that serves the greater community 3) Set the gearing levels to optimal levels.in multiple areas. 4) Mobilize institutional investors for guaranteed off-take. 5) Manage your own properties.Future projects 6) Maximize income streams through non rental income.Tebogo also owns sectional title offices in Sandton 7) Build direct relationships with your tenants.and has a small portfolio of properties offshore in 8) Maintain adequate maintenance reserves through the lifeSwitzerland. cycle of the investment. Student accommodation at the right price is on his 9) Consider listing at the right time.radar screen in both Johannesburg and Pretoria. Other 10) Go green wherever possible.new opportunities include the affordable housing spaceand urban renewable dwellings in strategic Central RESOURCESBusiness District areas dealing with housing shortagesin the rental market. Talis Holdings Groupwww.reimag.co.za MAY 2015 SA Real Estate Investor 45

GREENEnergy EfficiencyIncentivesHow Green Is Your Property?BY MEGAN DIENERM inister of Public Enterprises, Lynne Brown, Africa’s (GBCSA) Green Star SA rating tools not has warned South Africa of Eskom’s only guarantee that businesses live up to their green continuing supply vulnerability and to building claims, but also assist with their endeavours toexpect load shedding for at least the next two years minimise their carbon footprint,” says GBCSA CEO,as it battles to deal with the power shortfall, which Brian Wilkinson.has already caused South Africa’s Growth DomesticProduct to decline by an estimated 10%. “With happier, healthier employees and existing of evidence significantly reduced operations and Given this threat, President Jacob Zuma has maintenance costs at greener buildings, the benefits ofencouraged the private sector to ‘go green.’ Government a Green Star SA rating are extensive,” Wilkinson says.now plans to increase energy efficiency incentives. Firstly, use the Energy Water Performance (EWP) mini-tool These incentives will offer landlords and business to do a green audit. This tool benchmarks an office building’sowners a much needed financial respite from energy and water consumption against an industry mean. So, ifrising electricity costs needed to power industrial your asset compares poorly, you can be sure that investing in itsmanufacturing plants, office spaces and retail shopping electricity and water efficiency will bring worthwhile benefits tomalls. the building’s bottom line, attractiveness, and sustainability, and the environment too. While the EWP mini-tool makes up 40% of “Greater energy efficiency the EBP, it is also available as a separate certification. is crucial.” Building owners wanting to get a Green Star SA rating can, Greater energy efficiency is crucial. More property together with their green building consultant, submit thedevelopments today are built with renewable energy necessary documentation to the GBCSA. Independent assessorsinfrastructure. Some corporate head offices are self- are employed to evaluate submissions and allocate points basedsufficient and have completely gone off the national on the green measures that have been implemented. Certificationpower grid. is awarded for 4-Star, 5-Star or 6-Star Green Star SA ratings.How green do you have to go to be considered officially Rating tools are property specific. The Green Star SA Interiorsgreen, and how will this be measured and rated? tool, meanwhile, focuses on efficient maintenance and operations of interior fit-outs and caters for a broad range of tenancies, Businesses are seeking solutions to bring about including office, retail and hospitality projects.reductions in operation and facilities managementcosts in light of, for example, Eskom’s announcement Tenants have all the power with this tool, allowing each tenancyin March that they are appealing for an additional 9,5% to have their own unique environmental design initiatives fairlyincrease on electricity costs over and above the already and independently benchmarked. It rewards healthy, productiveapproved 12%. Sustainable solutions are desperately places to work, which are less costly to operate and maintain andsought. have a reduced environmental footprint. “The focus on green building has demonstrated the The Green Star SA Existing Building Performance (EBP) toolneed for a rigorous, standardised system that rates just focuses on how efficiently the building is operated and managed.how green projects are with tangible results to back up It is only valid for a period of three years. Energy and waterthese claims. The Green Building Council of South monitoring, management policies and plans are all required. RESOURCES The Green Building Council of South Africa (GBCSA)46 MAY 2015 SA Real Estate Investor www.reimag.co.za

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INVESTOR INTELLIGENCETransport TrendsTap Into The Impact On Property ValuesBY MONIQUE TERRAZASS mart investors keep a close eye on transport In practice trends and developments, understanding the A pertinent case in point is London’s Crossrail project. significant impact it has on the value of their According to research for Crossrail by GVA, the UK’sproperty investments. largest independent commercial property consultant, Crossrail can help create £5.5 billion in added value to Almost every major land use study has come to residential and commercial real estate along its route.the conclusion that transportation improvementspositively affect the value of nearby property. Buyers Dubbed ‘the Crossrail effect’, the positive impact onand tenants place a premium on easy access to a investment decisions are already evident and at manyconvenient transportation network. locations Crossrail is supporting and influencing new development. Crossrail will support the delivery of over Classical economic theory suggests that when a 57,000 new homes and 3.25 million m2 of commercialhighway or railway is initially built, large parcels of space. Commercial office values around Crossrailland that previously had poor accessibility – or none stations in central London will increase over the nextat all – are suddenly underpriced. The market often decade, with an expected uplift of 10% in capital valueimmediately responds: the area is quickly developed above an already rising baseline projection. Residentialand the real estate market establishes a new equilibrium capital values are projected to increase immediatelybased on the new transportation technology. The around Crossrail stations in central London by 25%,land-value impacts that are experienced can be and by 20% in the suburbs, again above a rising baselinesignificant. The advantage to residential property is projection.that accessibility improves the attractiveness of high Local experience “The land-value impacts Locally, the Gautrain Rapid Rail and Bus Rapid Transit (BRT) projects have had a similar impact on that are experienced can property values in the areas surrounding the stations. The demand for property intensified in some areas be significant.” around the Gautrain stations, with a corresponding increase in the development of new or revampeddensity living and land usage. In terms of commercial accommodation. The stations have also furtherproperty, it will improve employment availability and stimulated commercial property development, with thethe concentration of activity. innovative Sandton Eye mixed-use development across the road from the Sandton Gautrain station as just one Of course, certain land uses may be negatively example of property developers taking advantage of theimpacted by the noise, emissions, and vibrations opportunities brought by improvements in transportassociated with close proximity to major transportation infrastructure.hubs, and construction-associated impacts can alsoreduce values in the short term, while projects are Opportunities aboundunderway. Studies indicate that for lower income Smart investors pay significant attention to theneighbourhoods, the benefits of accessibility more than opportunities that arise from the public sector’scompensates for any nuisance effects. Higher value focus on the delivery of transport infrastructure.homes may be more sensitive to nuisance effects than An improvement in infrastructure not only has theto improvements in accessibility. potential to alter existing market dynamics, but it also opens the opportunity for new developments that are carefully integrated with transport networks.48 MAY 2015 SA Real Estate Investor www.reimag.co.za